tv Nightly Business Report PBS January 14, 2011 6:30pm-7:00pm PST
>> susie: now that the economy's picking up will americans save more or spend more? >> we have had sort of a thrift ethic which always competes against a materialistic ethic. and they're always at war with one another. >> tom: a look at what consumers are doing with their money. you're watching "nightly business report" for friday, january 14. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> susie: good evening, everyone. mixed signs today about the mind-set of consumer. they're spending a bit more, but tom, they are still uneasy about the economy. >> tom: that's right, susie. we saw conflicting reports today. retail sales for december rose six-tenths of percent-- the biggest annual gain since 1999. but, a measure of consumer sentiment took a unexpected dip in january. >> susie: so are consumer attitudes changing when it comes to money. suzanne pratt gets some answers.
>> reporter: since the great recession americans have gotten a lot more familiar with these little guys. that's because we're saving more, spending less and paying down debt. barbara whitehead, director of the templeton center for thrift and generosity, says our rediscovered frugality is here to stay. >> just even in a cultural way, it's a shift. it's a sort of change of pace. some people say they really enjoy that they slow down a little bit, or that they can be more thoughtful about what they do spend. >> reporter: economists aren't so sure and the data is starting to support their skepticism. the savings rate hovered near 0% in early 2008 after a decade of over-consumption. during the recession it surged to a 6.9%. but, in last six months it has trended lower recently slipping to 5.3%. why should we care about how much we sock-away. experts say a higher savings rate not only improves personal balance sheets. but it makes more money available for investment.
but, economist yelena sholetuva says right now there's a downside to too much saving. >> the ongoing deleveraging still represents a speed limit on an acceleration in consumer spending. >> reporter: experts say what's key to a healthy economy is finding the right level of saving and spending. and, also it pays to understand the difference between spending what you don't have and saving to spend. >> people who save actually spend more over a lifetime, then people who don't save. and, so, i think that's the distinction, spending what you actual have in your pocket. >> reporter: one reason why americans have so much trouble saving: shopping has become a national past time. if we could find something else to do on weekends, they're might be more money in our piggy banks. suzanne pratt, "nightly business report," new york. >> tom: here are the stories in tonight's n.b.r. newswheel:
a strong start to bank earnings helped stocks end the week higher. the dow rose 55 points, the nasdaq added 20 and the s&p 500 was up nine. trading volume ended the week on a high note with just over a billion shares trading on the big board and over two billion on the nasdaq. a big day for a.i.g. as the bailed out insurance giant repaid $47 billion to the federal reserve bank of new york. the move clears the way for the company to begin exiting u.s. government ownership. the treasury holds 92% of the company's stock valued at roughly $68 billion. it plans to sell that stake over the next two years. meanwhile, the treasury today said it will auction warrants in citigroup, boston private financial and wintrust financial during the first quarter. that will effectively end the government's stake in those firms. still ahead, what's behind the gold rush? gold is up 60% over the past two years. how it began and what's ahead. bloomberg's cam simpson joins
us. >> susie: get ready for a pick up in bank lending. the nation's bankers are predicting consumer lending will rise 2.7% in 2011 and business lending by more than 4%. that forecast released today by the american bankers association sounds good, but not good enough considering huge profit gains at the nation's banks. wells fargo economist scott anderson says the disconnect is all about demand. >> even though businesses are raking in record profits, not a lot of them are expanding their employment and business spending and that's been an impediment to stronger loan growth. i think that will start to ease in 2011, more than what we saw last year. >> susie: many banks say they'll be lending more to small businesses. loans to firms with fewer than 500 people are already starting to pick up. but as diane eastabrook reports, banks are still choosy about who gets their money. >> reporter: on chicago's south
side workers for a&d property services are cleaning out one of 3,700 foreclosed properties the firm manages. with business booming owner ananias granger recently took out an $800,000 loan to hire more workers and upgrade the company's computers. >> the i.t. portion and the technology portion is constantly changing; our guys now we have computers out in the field. >> reporter: banks say lending to small business is thawing after a near two-year deep freeze. j.p. morgan chase says last year small business lending increased 50% over the previous year and should increase again this year. fifth-third bank says it's lending more to small firms, especially so-called recession resistant businesses like funeral homes, grocery stores, and medical facilities. marino orlandi a vice president for fifth third's business banking group credits an improving economy. >> companies are doing a little
better. there are certain companies that have made the adjustments. they probably had a terrible year in '09, they had a better year in '10 and because they had a better 010 we feel more comfortable lending money to them. >> reporter: still a lot of small businesses are being left out in the cold. banks aren't lending much to start-ups or microbusinesses which have fewer than five workers. here in chicago those businesses comprise about a quarter of the city's employment base. >> you connect it to one of the closest locking positions. >> reporter: jim orrico demonstrates ez rock-- a device he developed that helps caregivers move disabled patients. his start up-- assistive medical equipment-- wants a $100,000 loan to add a sales person and expand inventory. but so far every bank has told orrico no. >> being a young company just starting out we don't have a lot of collateral that they can use to fully collateralize the loan.
also because we are a new business we don't have the revenue history as well. >> reporter: in chicago some small firms are turng to accion chicago-- a non-profit that lends to micro businesses. but the organization has a $25,0000 limit. c.e.o. jonathan brereton says firms that need more money have few options. >> a couple of years ago they would get a home equity loan, right? so, they had equity in their house and they would eke out equity in the home and use that for business. there aren't a lot of home equity loans being made these days because frankly people don't have a lot of equity in their homes. >> reporter: sometimes where there's a will, there's a way. after several banks refused coffee wholesaler crop-to cup a $200,000 loan, co-founder jacob elster got creative. he pitched investors on a promissory note he devised called coffee notes. >> with this financial package we've been able to go out to investors and raise the money we've needed for short term inventory needs. >> reporter: elster thinks he now has enough capital to grow
his company's bottom line and perhaps become a better loan candidate in the future. diane eastabrook, "nightly business report," chicago. >> modest gains here on wall street. it looks like investors gearing up for the holiday weekend, and also gearing up for next week's flood of earnings reports. >> tom: certainly peak weeks of earnings are still in front of
us but still lots of optimism, especially after the j.p. morgan numbers we saw early, and that clear is going to be included in tonight's market focus. >> tom: the week came to a strong end for stocks, pushing the major indices to new post- recession highs. the dow saw gains in three of the past five sessions, adding almost 1% for the week. the nasdaq saw the biggest gains among the three, up almost 2%. and the s&p 500 added 1.7% for the week. late today, b.p. stock was ignited thanks to a deal with the russian state controlled oil giant rosneft. the two will take equity positions in each other. b.p. gets 9.5% of the russian company, while the russian firm takes 5% of b.p. they will also cooperate on exploring for energy in the russian arctic.
shares popped almost 4% ahead of the official announcement after the closing bell. this takes b.p. to its highest price since the late april gulf oil disaster. b.p. was at $60 just before the spill. the energy was the second best performing sector, led by this trio of oil service stocks. diamond offshore is a deep water driller. shares hit an eight month high. national oil well hit a two and a half year high. and b.p.'s partner in the gulf oil well that exploded. anadarko petroleum is at an all- time high with this 3% rally. the other leading sector today was the financial sector. in fact, since october, financial stocks have led the market rally. let's roll out the chart of the financial select exchange traded fund. this includes banks and insurance companies. today's gains takes the fund to within less than a dollar from a new 52-week high.
much better than expected earnings from j.p. morgan were in the spotlight today. it is the first big bank to report fourth quarter results. it said consumers and business loan activity has picked up. shares responded well to the report up 1%. volume almost tripled. we have an in-depth analysis of this chart on our blog. go to n.b.r. on pbs.org. bank of america was the leading dow component today with a three and a quarter gain. we've focused on a 90 session chart really showing the stiff rally b. of a. shares have seen since late november. since the november low, the stock is up almost 40%. on the heels of intel's announcement last night to increase its capital spending, semiconductor equipment makers rallied. novellus led the pack up 12%. this is a seven-year high.
dutch company a.s.m.l. popped 9% to a ten-year high. and applied materials closed over $15 for the first time since 2008. the day's disaster may have been coinstar. shares lost more than a quarter of their value. the firm cut its outlook. it has delayed the rental of some new d.v.d.'s releases, hurting that business. we saw the first initial public offering of the year this week. american assets hit the market at $20.50 per share. tonight at $21.31. this is a real estate investment trust in california and hawaii. and that's tonight's market focus.
>> susie: gold prices fell sharply today, closing at $1,360 an ounce. but they're still up 60% over the past two years and expected to go even higher this year. what's behind the gold rush? that's the subject of a story in "bloomberg markets" magazine that will be on newsstands next week: "how gold got hot". when i talked with cam simpson, the bloomberg reporter who did that story, he said the bull market in gold actually started with a conversation on a golf course in london eight years ago. >> the head of a trade group for the gold mining company chrpz desperate to break the 20-year slump in gold brought a man into london to try and help him lead this effort to create exchange-trade gold in the u.s. for the first time ever.
and it really opened up gold investment. it's investors who have been driving gold prices throughout the last decade, especially in the last few years. >> suzanne: and the e.t.f. that came out as a result of that conversation has been on a steady climb up since its launch in 2004. you say investors could get burned. >> gold prices are really, really difficult to predict, even for the professionals who do it for a living. it has everything to do with nothing to do with gold. it has to do with fears about the economy. it has to do with fears about too much currency in the system, quantitative easing. it has to do with interest rates. it has to do with psychology, a lot more than anything in terms of production or consumption. gold just innocent like that. there are fears, that you know, gold eventually will have to fall, and that small investors who are just now paying attention to gold and piling in through these e.t.f.s could really pay a price.
>> suzanne: a lot of people are talking about a bubble in gold. and from your reporting what were you hearing about the outlook for 2011? >> you know, the predictions are across the board. again, that's what makes it really tough to know. i think the consensus view is probably the one that was stated in a survey on friday by the london bouillon market association which is sort of the standard bearer here in london. and they're predicting probably about 1,457 dollars an ounce as an average for 2011 but anything is possible. gaern it's all dependent on factors that really have nothing to do with gold, making it really tough to predict. >> suzanne: and, cam, your research shows over a long stretch of time that gold actually has underperformed other assets, looking from 1944 to the present, that gold-- stocks did better, bonds did better than gold. >> absolutely. gold has a really short track record in terms of the kind of prices that we've been seeing. in the last couple years,
especially since the collapse of lehmann brothers, when people were deps troot find some kind of safe haven for their money in the wake of all the currency concerns that we've been seeing in europe and the u.s. so it's really tough to know where this run is going to go and how long it's going to last. >> suzanne: and besides the spider e.t.f.s we've been talking about, there are a the lot of other gold e.t.f.s and looking at the top performers, it looks like investors have a lot of choices. >> some of somelike the spider gold fund divide gold basically so you're buying a tenth of an ounce, or the equivalence of a tenth of an ounce when you buy a share. i-shares, reconstituted itself last year so you're buying one-00th of an ounce, and i found some day traders getting into that because it's basically the equivalent of the cost of a pizza delivered to a dormitory, about 15 bucks. you have a prettied about spread you can choose from. >> suzanne: okay, very interesting information. thank you so much for coming on the program, and your article
"how golds got hot" in the latest issue of "bloomberg market magazine." >> tom: here's what we're watching for next week: our market monitor guest is hank smith, chief investment officer at haverford investments we'll also see quarterly results from several companies, including: citi, goldman sachs, wells fargo, bank of america and general electric. also next week, as china's president hu jintao visits the u.s., we'll look at china's role in the world economy. >> susie: stop the presses. the launch of news corp's ipad only newspaper has been delayed. "the daily" was supposed to be unveiled on wednesday but it's been postponed for a few weeks. apple and news corp reportedly decided they need more time to test a subscription service for the paper. the paper has its own newsroom staff across the u.s. and will resemble a national newspaper, but it won't be in print or even online. it will only be available on ipads. >> tom: it may soon be easier for americans to travel to cuba. the white house plans to loosen
current policy to allow students and church groups to visit the communist country. that's the word today from florida senator bill nelson. other policy changes will allow any american to send up to $2,000 a year to cuban citizens who are not part of the castro government or communist party. the white house had no comment.
>> tom: a positive first half is underway for investors, but tonight's market monitor guest is nervous about the second half of the year. he's sandy lincoln, senior vice president and investment strategist at m&i investment group. he joins us this evening from the c.m.e. group in chicago. sandy, always nice see you. welcome back to n.b.r.. >> thanks, tom, good to be back. >> tom: we're not even to the super bowl, not even to valentine's day yet and already a little nervousness about the second hamp of the year. talk to me about the positive feelings you have for the first half? >> a lot of it is inertia. there's a lot of good stuff happening-- earnings corporate sales are strong. people are lo and behold moving money from bonds back to stocks, you have the federal reserve doing stimulative things, the
evaluation of stocks. are attractive. we think the first and second quarter, those patterns are going to be pretty positive and we think carry the market to higher ground, tom. >> tom: this much we do know at the end of june-- that's when the federal reserve is scheduled to end its bond buying. is that what makes you nervous about the second half the year? >> yeah, that's a big part of it. when we take the quantitative easing out, we take one of props out from underneath economic performance, and then we're going to be left with the test as to whether or not the economy can really deliver on its own two feet three p3.5%, 4% growth rate. we think it will but if it disappoints you're going to see the stock market, in particular, pull back. that's the cautionary tale on the second half sglomt market is not going to wait until it sees the cautionary figures. is now the time to make the portfolio changes? >> the pac-man gets ahead of the game quickly that's for smurp and we don't know how much in advance the market starts to discount that information. i wouldn't say you abandon financial assets but maybe you
get positioned a little bit more with shorter-duration fixed income and on the equity side maybe a little more exposure to very undervalued, two-year large-cap growth stocks and that's how i think you sort your position in case the second half doesn't come through. >> tom: you brought along a couple of new stock picks including w.u., western union the ticker symbol, an old, old name people will certainly remember. you think there's value here under $20 per share. why? >> underline the word "value". i think that's right. it's selling at 12 times its projected earnings. we think really attractive. it's got a lot of wind at the back in terms of the economic recovery around the globe. it's a global leader in terms of payment sifrsss and money transfer operations. they've got 410,000 agents in 200 countries. we just think it's a steady-eddie, produces 10% to 15% earnings growth and at these kinds of prices and the stock has held steady for the last six or seven months, we think it's a
good buying opportunity for a value investor, a really good play, we think. >> tom: what kind of return are you expecting over the next 12-24 months? >> i think you'd certainly look for a stock that could as youly be up 10% to 20% over that period of time, tom sgloum also like-- >> not too bad. >> tom: not too bad at all. corporate financing. you're not afraid of corporate financing. interesting pick with safeguard scientific, a public company that does private kmit investing has had one heck of a really from $10 a share to close to 18. what's the catalyst from here? >> the catalyst is, this is a company that is into private equity through a public vehicle and they invest primarily in companies of health care interest and technology interests. they take a minority investment in those companies and help them produce a new product or better product, help with distribution and eventually want to sell their minority interest for a higher price. they did just two sales very recently, and they got three to four times what they had put into the companies when they sold them.
and that's what took that stock price higher. but they've got a portfolio of 15 or 20 companies that remain. we think some pretty attractive names in there, and we think the stock can go higher from here, tom. >> tom: let's get to your last stock picks in junz. you liked n.b.r., and h.m.s. holdings. nice returns, 20% each. still holding? >> yes, we are. we own them both and like them both and have a pretty full position in h.m.s.. we would add to the position in neighbors here. >> tom: disclosures for these four stocks, sandy? >> i don't own any of them personally. we do own them in the corporate portfolios, tom. >> tom: our market monitor, sandy lincoln with m&i investment group. >> susie: the clock is ticking down to pro football's ultimate match up: superbowl 45 on february 6. still up in the air, which teams will play in the big game at the billion-dollar cowboys stadium in arlington, texas. but the business side of this
mega-event has been in the works for years. and this monday, the martin luther king junior holiday, we'll examine that business in a special edition: "beyond the scoreboard: behind the scenes at the superbowl." be sure to join us. >> tom i know who you will be rooting for, watching on sunday. the chicago bears. >> tom: the bears, absolutely. still looking to reprize the super bowl shuffle no, doubt. we can only keep our fingers crossed. we'll leave it there tonight. that's "nightly business report" for friday, january 14. i'm tom hudson. goodnight, everyone and have a great weekend. you, too, susie. >> susie: good night, tom. i'm susie gharib goodnight, everyone. we hope to see all of you again next week.